Making It with Jon Davids: Episode 193 - Here's How I Built a Coffee Chain from Scratch | Gregory Zamfotis

Introduction

In Episode 193 of Making It with Jon Davids, host Jon Davids engages in an insightful conversation with Gregory Zamphotis, the founder of Gregory's Coffee. Established in 2007, Gregory's Coffee has grown from a single location to over 56 stores across multiple states, navigating challenges such as intense competition, the COVID-19 pandemic, and tariffs. This detailed summary encapsulates their discussion, highlighting key strategies, insights, and the entrepreneurial journey that fueled this rapid expansion.

Background and Founding of Gregory's Coffee

Jon Davids opens the conversation by introducing Gregory Zamphotis, who, despite graduating magna cum laude from Boston University and completing law school, opted to pursue an entrepreneurial path in the coffee industry.

[00:00] John Davis: "Greg finishes university, finishes law school, and then decides to open a coffee shop. Kind of a crazy move and a crazy story..."

Gregory Zamphotis attributes his decision to his upbringing in the food business, having spent his summers assisting his father with Fast Casual Concepts in New York City. This early exposure ignited his passion for entrepreneurship and the food sector.

[01:05] Gregory Zamphotis: "I grew up in the food business. My father owned and operated Fast Casual Concepts in New York City..."

Launching Gregory's Coffee: Identifying Market Gaps

Transitioning from managing a sandwich shop under his father's guidance, Greg identified an opportunity in New York City's coffee market. Noticing the dominance of established brands like Starbucks and Dunkin, he aimed to introduce a high-quality, elevated coffee experience in prime, high-traffic areas.

[03:43] Gregory Zamphotis: "When I took a look at coffee... the only options were Starbucks, Dunkin, or maybe even like a cart you might find on the street... deliver a unique value proposition that just wasn't available in the New York City market at the time."

Early Operations and Overcoming Initial Challenges

Launching the first Gregory's Coffee location required intense dedication, with Greg personally managing the store for up to 80 hours a week. Initial days were focused on refining operations, enhancing customer service, and optimizing workflow to balance quality with speed.

[05:11] Gregory Zamphotis: "Early days, customers would sort of liken that store to me because I was there 60, 70, 80 hours a week... quality wasn't anywhere near what we could."

Greg emphasized the importance of adaptability, quickly learning from customer feedback and making necessary adjustments to improve the business model.

[06:22] Gregory Zamphotis: "Getting people served in a reasonable amount of time... training as to the steps needed to produce products the right way."

Scaling Up: From One to Multiple Locations

The transition from a single store to multiple locations presented significant challenges, particularly in maintaining quality and consistency across different sites. The second location, opened in a strategic Midtown area, became an immediate success due to high foot traffic from nearby hotels and offices.

[25:34] Gregory Zamphotis: "You can't be at two places at one time. So you need to start building more trust and faith with the team to be able to execute on your vision even if you're not there."

Greg highlighted the importance of location strategy and the impact of brand presence in scaling the business effectively.

Competing with Industry Giants

Facing competition from well-established brands like Starbucks, Greg focused on creating a distinctive brand that combined quality with convenience. Gregory's Coffee differentiated itself by offering premium products in easily accessible locations, ensuring a blend of high quality and high volume.

[04:54] Gregory Zamphotis: "Blending quality and quantity. So serving a lot of people a really high quality product."

He also discussed the significance of menu diversification, introducing freshly baked goods to increase the average basket size and enhance customer experience.

[20:03] Gregory Zamphotis: "Our biggest miss early on was people would come for the coffee and then they'd go somewhere else to go find something to eat... until years two and three when we started pushing further into a better baked program."

Navigating Financials and Unit Economics

Greg provided a breakdown of the unit economics essential for sustaining and growing a coffee shop business. He detailed how fixed costs like rent necessitate a specific volume of daily sales to achieve profitability.

[17:09] Gregory Zamphotis: "So if I do $1,000 in sales a day... you start seeing a little bit of profit for coffee."

This strategic financial planning ensured that Gregory's Coffee remained solvent and capable of funding expansion without excessive cash burn.

Impact of COVID-19 and Adaptations

The COVID-19 pandemic posed existential threats to Gregory's Coffee, especially since the core business relied heavily on daytime office populations, which saw a dramatic decline. However, pre-pandemic strategic decisions, such as expanding into suburban markets and emphasizing delivery services, provided a buffer against the downturn.

[31:47] Gregory Zamphotis: "Thankfully we had made the decision to penetrate into some suburban markets... the suburban stores were... doing quite well."

The pandemic accelerated the integration of delivery services, shifting from less than 1% to approximately 30% of the business by early 2021, and stabilizing around 10% post-pandemic.

[34:06] Gregory Zamphotis: "Delivery was less than 1% of our business... grew to like 30%... now it's settled into more like 9 or 10%."

These adaptations not only helped Gregory's Coffee survive the crisis but also made the business more resilient and flexible for future challenges.

Challenges with Tariffs and Cost Management

Greg discussed the ongoing challenges posed by tariffs, especially on essential ingredients like coffee, which is predominantly imported. Prior strategic shifts, such as moving paper products to domestic suppliers, mitigated some of these impacts.

[35:52] Gregory Zamphotis: "We've been moving everything domestically... our paper cups completed the move domestically probably in February."

He emphasized the necessity of monitoring cost fluctuations and making informed decisions to protect customers without compromising on quality.

[36:53] Gregory Zamphotis: "We're trying to protect the customer. So we don't want to make... negative impact."

Growth Strategy and Future Plans

With 56 locations spanning New York, New Jersey, Tennessee, Illinois, and Arizona, Greg outlined his vision for exponential growth. He highlighted the importance of entering new markets strategically, ensuring brand familiarity, and leveraging strong real estate choices to maintain a dominant presence.

[41:06] Gregory Zamphotis: "We opened 20 stores in the last 12 months... in Jacksonville, Florida... more than one location in Jacksonville, that's just one."

Greg also mentioned the capital-intensive nature of retail expansion, contemplating various funding strategies to support future growth while maintaining control over the brand.

[42:33] Gregory Zamphotis: "Retail business like ours, it is capital intensive to open new locations... we're not a franchise at the moment."

Leadership Philosophy and Personal Insights

Greg's leadership style is underscored by his hands-on approach and unwavering optimism. By remaining actively involved in daily operations and maintaining close relationships with his team, he ensures that the company's vision is consistently executed.

[43:57] Gregory Zamphotis: "I'm pretty confident in what we're doing and certainly in myself... there's no, you know, I'm not the only one who says there's no losses, only lessons."

His commitment to staying grounded and accessible fosters a collaborative and motivated work environment, essential for sustained growth and innovation.

Conclusion

Gregory Zamphotis's journey with Gregory's Coffee exemplifies the blend of strategic vision, operational excellence, and adaptability required to build a successful business in a highly competitive market. From meticulous financial planning to agile responses to global challenges, Greg's story offers valuable lessons for aspiring entrepreneurs aiming to scale their ventures sustainably.

Notable Quotes

• Gregory Zamphotis on Starting the Business:

  “I wanted to do something of my own... Let's figure it out.”
  [01:05]

• On Identifying Market Gaps:

  “Blending quality and quantity. So serving a lot of people a really high quality product.”
  [04:54]

• Regarding Financial Strategy:

  “If I do $1,000 in sales a day... you start seeing a little bit of profit for coffee.”
  [17:09]

• On Resilience Post-COVID:

  “I think it made us more resilient... Business certainly don't wish it had happened...”
  [34:15]

• Leadership Philosophy:

  “There's no, you know, I'm not the only one who says there's no losses, only lessons.”
  [43:57]

This comprehensive summary encapsulates the key themes and insights from Episode 193 of Making It with Jon Davids, offering listeners a clear understanding of Gregory Zamphotis's entrepreneurial journey and the strategies that propelled Gregory's Coffee to success.